Geopolitical tensions making problems worse

“The risk of negative annual growth in GDP (in 2014) is still high, and these risks are probably rising on the back of geopolitical tensions.”

Russia faces a combination of economic problems:

Inflation is high and rising. According to the Wall Street Journal, Raiffeisen Bank expects the recent food import bans imposed by Russia on the US, EU and its allies will increase its 2014 estimate for inflation from 6% to 9%.

GDP is shrinking.

There is a serious capital flight problem (investors moving their money out of the country).

Investment has slumped.

The world’s richest nations are tightening economic sanctions.

Oil prices are falling. The Moscow Times reported earlier this week that Russian Urals crude weakened for the eighth day running on Monday, falling well below $100 per barrel for the first time in a year. Russia has balanced its 2014 budget at $114 per barrel.